3 more downtown towers on the market

(Crain's) — Three more downtown office towers are up for sale amid expectations that investor demand is growing for second-tier buildings.

GE Pension Trust has hired Holliday Fenoglio Fowler L.P. to sell two Class B properties in the Loop, a 624,000-square-foot high-rise at 230 W. Monroe St. and part of a 649,000-square-foot building at 200 W. Monroe St., according to Real Estate Alert, a trade publication. The properties are expected to fetch nearly $210 million.

AREA Property Partners, meanwhile, has hired Eastdil Secured to sell a 385,000-square-foot building at 311 W. Monroe St. that could draw bids in the $40-million range, Real Estate Alert reported. The building is about 97 percent leased, with BMO Harris Bank occupying about 70 percent of its space under a lease that expires in roughly two years.

Downtown office building sales jumped 24 percent last year, to $2.7 billion, according to Jones Lang LaSalle Inc., amid an improved leasing market, low interest rates and an increased appetite for risk among investors. Though so-called Class A buildings accounted for much of the sales volume, investors are taking more interest in older Class B properties that charge lower rents.

First-year returns, or capitalization rates, have edged lower as prices have risen. Capitalization, or cap, rates on downtown Chicago office buildings dropped slightly last year to 6.4 percent, according to a report by New York-based research firm Real Capital Analytics Inc.

That's still higher than Boston, Manhattan, Washington and Los Angeles, which had cap rates ranging from 5.3 percent to 6 percent, the report says.

An AREA spokeswoman confirmed that 311 W. Monroe had been put up for sale. A GE Pension Trust spokesman declines to comment. Efforts to reach a Holliday Fenoglio executive were unsuccessful, and an Eastdil executive declines to comment.

GE is selling the 83 percent of the space it owns at 200 W. Monroe, with the remainder owned by the Jewish Federation of Metropolitan Chicago.